The main domestic money-laundering crime threats are consistently understood by the key authorities in South Africa, but the understanding of their relative scale, money-laundering vulnerabilities, and the threats from foreign predicates is limited, the latest report from the Financial Action Task Force (FATF) has revealed.
Released on Thursday, the fourth round mutual evaluation report on anti-money-laundering and counter-terrorist financing measures also found that the key authorities’ understanding of terrorist financing risks was underdeveloped and uneven.
“Some money-laundering risks are being mitigated but some significant risks remain to be addressed. Terrorist financing risks are not being adequately addressed,” it reads.
Among other reasons, state capture was mentioned as one of the factors that helped generate corruption proceeds and also undermined key agencies meant to combat such activities.
However, government initiatives from 2018/2019 were starting to address the issues.
According to the report, the country’s law enforcement agencies lack the skills and resources to proactively investigate money-laundering or terrorist financing, despite the financial intelligence centre (FIC) having produced operational financial intelligence that the law enforcement agencies use to help investigate crimes and trace criminal assets.
“A reasonable number of money-laundering convictions is being achieved but only partly consistent with South Africa’s risk profile. Cases largely concern self-laundering and few cases of third-party money-laundering and foreign predicate offences are prosecuted,” reads the report.
“The proactive identification and investigation of money-laundering networks and professional enablers is not really occurring. Most money-laundering convictions relate to fraud cases and there are fewer investigations and successful prosecutions relating to other high-risk crimes. In particular, money-laundering cases relating to state capture have not been sufficiently pursued.”
While the country has successfully pursued confiscation of criminal proceeds using civil forfeiture powers, it has had less success recovering assets from state capture and proceeds which have been moved to other countries.
Some recent cases, however, suggest the country is improving in this regard.
The country is also lacking in efforts to detect and confiscate falsely or undeclared cross-border movement of cash. This despite the prevalent use of cash in the country having been assessed as high risk from terrorist financing and money-laundering.
“South Africa has a relatively high volume and intensity of crime and more than half of reported crimes fall into categories that generate proceeds. The main domestic proceeds-generating predicate crimes are tax crimes, corruption and bribery, fraud, then trafficking in illicit drugs, and environmental type crimes,” reads the report.
“As a large economy and a regional financial hub for sub-Saharan Africa, South Africa has a notable exposure to the threat of foreign proceeds of crime generated in the region being laundered in or through the country. South Africa is exposed to terrorist financing risks associated with the financing of foreign terrorism, foreign terrorist fighters (FTFs), and potential domestic terrorism.”
Read the full report here